Inequality, unemployment and unresponsive government: A collision is coming

Robert B. Reich

The biggest question in America these days is how to revive the economy.

The biggest question among activists now occupying Wall Street and dozens of American cities is how to strike back against the nation's almost unprecedented concentration of income, wealth and political power in the top 1 percent.

The two questions are related. With so much income and wealth concentrated at the top, the vast middle class no longer has the purchasing power to buy what the economy is capable of producing. (People could pretend otherwise as long as they could treat their homes as ATMs, but the borrowing ended when the housing bubble burst in 2008.)

The result is prolonged stagnation and high unemployment as far as the eye can see. Last Friday, the Labor Department reported 80,000 new jobs in October. But more than 100,000 are needed just to keep up with the growth of the nation's working-age population. And the wages of most people with jobs continue to drop.

Until we reverse the trend toward inequality, the economy can't be revived.

Yet the biggest question in our nation's capital right now has nothing to do with any of this. It's whether Congress's so-called "supercommittee" -- six Democrats and six Republicans charged with coming up with at least $1.2 trillion in budget savings -- will reach agreement in time for the Congressional Budget Office to score its proposal, which must then be approved by Congress before Dec. 23 in order to avoid an automatic $1.2 trillion in budget savings requiring major across-the-board cuts starting in 2013.

Have your eyes already glazed over?

Diffident Democrats on the supercommittee have already signaled a willingness to cut Medicare, Social Security and much else Americans depend on. The deal is being held up by regressive Republicans who won't raise taxes on the rich -- not even a tiny bit.

Most of the nation's commentariat have bought into the myth that our biggest economic problem is the long-term budget deficit. They're urging Democrats to pare safety nets even further and Republicans to agree to tax hikes.

President Obama, meanwhile, is out on the stump trying to sell his "jobs bill" -- which would, by the White House's own estimate, create fewer than 2 million jobs. Yet 14 million people are out of work, and another 10 million are working part-time who'd rather have full-time jobs.

Republicans have already voted down his jobs bill anyway.

The disconnect between Washington and the rest of the nation hasn't been this wide since the late 1960s.

The two worlds are on a collision course: Americans who are losing their jobs or their wages and can't pay their bills are growing increasingly desperate. Washington insiders, deficit hawks, regressive Republicans, diffident Democrats, mainstream pundits, well-coiffed lobbyists, and the lobbyists' wealthy patrons on Wall Street and in corporate suites haven't a clue or couldn't care less.

I can't tell you when the collision will occur, but I'd guess 2012.

Look elsewhere around the world and you see a similar collision unfolding between the needs of average people and the demands of the financial sector for government austerity. You see it in Spain, whose "indignados" (indignant ones) fill the streets. In Greece, whose citizens are being squeezed by bankers. In Italy, whose young people are angered by lack of opportunity.

You see it in Chile, whose young are angered by higher tuitions and fewer jobs. In Israel, whose public is fulminating against soaring costs of food, education and housing. Even in China, whose young and hourly workers are demanding more -- and whose surge toward inequality in recent years has been as breathtaking as is the country's surge toward modern capitalism.

Increasing numbers of young people are idle -- a sure recipe for upheaval. In America, over 17 percent of those under 25 are jobless. In Europe, the rate is over 20 percent. In Spain, over 46 percent. In much of the developing world, the youth unemployment rate ranges from 30 percent to 50 percent.

Yet austerity rules the day. The banks are demanding it. And the pay and bonuses of global CEOs and bankers keep skyrocketing.

Will 2012 go down in history like other years that shook the foundations of the world's political economy -- 1968 and 1989?

The Occupier movement is still in its infancy in the United States. I have no idea whether the encampments that adorn many of our cities will resist winter's cold. But the grievances that underlie it will only grow.

Here, as elsewhere, people are outraged at what feels like a rigged game -- an economy that won't respond, a democracy that won't listen, and a financial sector that holds all the cards.

Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley and the author of "Aftershock: The Next Economy and America's Future." His blog is www.robertreich.org.